What did the credit market expect of Argentina default?
Subtitle: evidence from default swap data
By: Frank X. Zhang.
Series: Finance and economics discussion series ;; 2003-25; Finance and economics discussion series (Online) ;; 2003-25.
Publisher: Federal Reserve Board
Published: 2003
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Subjects: Debts, External -- Argentina -- Mathematical models.; Default (Finance) -- Argentina -- Mathematical models.
Description: "This article explores the expectations of the credit market by developing a parsimonious default swap model, which is versatile enough to disentangle default probability from the expected recovery rate, accommodate counterparty default risk, and allow flexible correlation between state variables.  We implements the model to a unique sample of default swaps on Argentine sovereign debt, and found that the risk-neutral default probability was always higher than its physical counterpart, and the wedge between the two was affected by changes in the business cycle, the U.S.  and Argentine credit conditions, and the overall strength of the Argentine economy.  We also found that major rating agencies had assigned over-generous ratings to the Argentine debt, and they lagged the market in downgrading the debt"--Federal Reserve Board web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 7/26/2004.
Also available in print.
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Mode of access: World Wide Web.